What is Earned Income vs. Unearned Income?

Earned

  • Typically from an employer (i.e. salary)
  • Can also be from your own business (self-employed)
  • You generate income from some type of “work” you have done
  • Annual bonuses
  • Hourly wages
  • Tips
  • Commissions
  • Some royalty payments

Unearned

  • Referred to as passive income
  • Interest from checking/savings accounts
  • Capital Gains and Dividends (from stocks)
  • Retirement (e.g. 401K) and Pensions
  • Inheritance or Gifts
  • Lottery or Prizes
  • Rental property income
  • Disability payments
  • Death benefits